Moving the World

By | 2017-10-17T08:24:21+00:00 October 17th, 2017|Global Market Update|

Archimedes was right. Source: Wikipedia. “Give me a lever and a place to stand and I shall move the earth.” That’s what Archimedes said when describing the advantage that leverage gives. Force times distance on one side of the fulcrum equals force times distance on the other side. That’s how you can lift a hundred pound weight with only five pounds of push – if the distance on one side is twenty times that of the other. Of course, this only works if the [...]

Dividend Aristocracy?

By | 2017-07-17T12:21:29+00:00 February 7th, 2017|Global Market Update|

They were the best of yields, they were the worst of yields … French Aristocracy. Remember what happened to them? Public Domain. Source: Wikipedia In an environment where short-term interest rates are barely moving up and bonds are exposed to rising inflation, many investors have turned to dividend-paying stocks to provide income for their portfolios. Many blue-chip companies yield more than 3%. How risky can such a strategy be? There’s a lot to like about dividends. They are the most transparent part of a [...]

The Importance of Small

By | 2017-07-17T12:21:44+00:00 September 9th, 2016|Global Market Update|

Do small stocks outperform? Comparison of S&P Small Cap and Large Cap indices. Source: Bloomberg On its face, this seems like a silly question. Everyone “knows” that small cap stocks outperform. Since 2000, small caps have grown over 4 times, while large cap shares have only doubled. There’s a 5% annuallized difference between the S&P 500 and the S&P 600 small cap index. Over longer time frames this relationship seems to hold up as well. From 1926 to 2015, small cap stocks returned 11.3% [...]

Alpine Meadows

By | 2017-07-17T12:21:57+00:00 May 23rd, 2016|Global Market Update|

What comes to mind when you think of the Alps? Photo: Kevin Connors. Source: Morguefile Maybe it’s clear mountain lakes and crystal blue skies. Maybe it’s sun and snow and skiing. Or maybe it’s money? A map of Europe scaled by per-capita GDP reveals an interesting tendency: the areas with the most mountainous topography tend to have higher incomes. Northern Italy, western Austria, southern Germany, and Switzerland are all significantly richer than other regions. This holds true despite differences in taxation, culture, transport, and [...]

Wagging the Dog

By | 2017-07-17T12:22:08+00:00 February 16th, 2016|Global Market Update|

Wagging the Dog Where does finance fit into the economy? Photo: David Whelan. Source: Morguefile Time was that the real economy was considered the dog and the financial economy the tail. Except for an occasional bubble, the tail didn’t wag the dog. What people ate and how they dressed was critical; how the saved and where they invested wasn’t. Now it’s not so clear. The world produced about $80 trillion in goods and services in 2015. At the same time, public and private markets [...]

Investments, Finance, and Robo-Advisers

By | 2017-07-17T12:22:43+00:00 June 25th, 2015|Global Market Update|

What’s the best investment plan? Photo: Andreas Praefcke. Source: Wikipedia Lots of people ask for investment advice. They need help managing their money. They talk about the stock market or bank rates. But what they really need is financial guidance. Classically, finance has three major reports: income, assets, and cash flow. Each of these areas has inflows and outflows—positive and negative entries. An income statement covers income and expenses; a balance sheet shows assets and liabilities; with cash flow there are inflows and outflows. [...]

Long Term, Short Term, Borrowed Term

By | 2017-07-17T12:22:46+00:00 May 27th, 2015|Global Market Update|

Remember Long Term Capital Management? Source: Pixabay Twenty years ago a couple of traders teamed up with some Nobel Prize winners to create an investment company premised on the notion that similar things act similarly—that in the long run, finance obeys rational rules. Small differences in price can be understood and used to create financial returns. […]

Balancing the Books (Part 1)

By | 2017-07-17T12:23:05+00:00 January 30th, 2015|Global Market Update|

What is a balance sheet? Source: Digital Juice A balance sheet is a financial statement that lists all your assets and liabilities—what you own and what you owe. It’s a fundamental part of finance. It’s an accounting ledger that lists, on one side, what you are doing with your money, and on the other side, where the money came from. It’s a snapshot at a point in time. Everyone and everything that deals with money has a balance sheet: families, businesses, governments—even central banks. [...]

Returning to Risk (Part 4)

By | 2014-05-15T09:36:22+00:00 May 15th, 2014|Global Market Update|

Why is risk so important? Risk-management is at the center of rational investing. It’s what keeps people up at night when markets are booming, and what allows them to sleep soundly during panics and depressions. It’s what allows your money to work for you, so that later in life you don’t need to. But risk-management puts a glaze over people’s eyes. Tell them you work in risk-management and they’ll quickly change the subject. Google the phrase and you’ll get links to wiki articles about [...]

China Dreams?

By | 2014-05-05T10:36:16+00:00 May 5th, 2014|Global Market Update|

Will China become a major market? China’s economy is huge. They are now the world’s second largest marketplace, at $8 trillion, about half the size of the US and 11% of the world. They’re a major player in trade, manufacturing, consumer goods, and large infrastructure projects. But their equity market is tiny. At $2 trillion, they’re 3% of the world’s equity markets—about the size of France. And their debt market is even smaller. Why the disconnect? Why would a world-class economy have such a [...]